Opinion Letter

Letter Number:O-2000-002
Tax Type:Kansas Retailers' Sales Tax
Brief Description:Capital improvement fees imposed by a country club.
Approval Date:02/01/2000

Office of Policy & Research

February 1, 2000


Thank you for your letter that we received late last month. In it, you ask whether a capital improvement fee imposed by your country club on its members is subject to Kansas sales tax. Please be advised that, based on the information you provided, these charges are subject to Kansas sales tax.

K.A.R. 92-19-73 currently governs the taxability of membership fees and dues. It provides:

Your club’s capital improvement fee is a “charge which is a debt owed to the club . . . by an existing member . . . in order for the member . . . to enjoy the use of the facilities of the club . . . for recreation or entertainment.” A member who refuses to pay the capital improvement fee would be denied the use of your club. This makes these payments subject to sales tax under this regulation.

The department has recently begun the process of updating K.A.R. 92-19-73. The following are the proposed changes to the regulation are being submitted as part of the first step in the review process for adopting new administrative regulations.

Under subsection (c) of this proposal, sales tax would be due on a country club’s capital improvement fees if the fee is not carried as a liability on the country clubs books. This means, for example, that if a member of the club joined in 1985 and paid a $20,000 for membership stock, pays a $5,000 capital improvement fee in 2002, and then is paid $25,000, as required under the by-laws by an initiate member for the membership stock when he or she leaves in 2003, there would be no tax on the $5,000 capital improvement payment. If the same member left and the stock value remained at $20,000, the $5,000 payment would be taxable.

If your club has by-laws, corporate minutes, or other documentation that shows that its members will recoup the capital improvement fee when they leave your club, you should submit copies of the documentation to me and ask me to reconsider this determination. Otherwise, the capital improvement fees charged by your club are fully taxable. Attorney/Policy & Research

Date Composed: 02/17/2000 Date Modified: 10/10/2001